Key highlights
- Silver ETFs dropped up to 21% after record highs
- Gold ETFs declined up to 7% on MCX
- Silver futures fell over 9% intraday
- MCX hiked margins to curb volatility
- Experts advise avoiding fresh long positions
Mumbai: Gold and silver prices witnessed a sharp correction on Thursday after touching record highs earlier this week, as a stronger US dollar, easing geopolitical tensions and aggressive profit booking erased recent gains across global and Indian markets.
Silver ETFs fell by up to 21%, while gold ETFs declined by up to 7% on the MCX, signalling a swift reversal in investor sentiment after a momentum‑driven rally.
Core facts behind the price fall
Silver futures on the Multi Commodity Exchange (MCX) dropped over 9% intraday, while gold prices also retreated from peak levels. The correction followed a period of rapid gains fuelled by geopolitical uncertainty, expectations of central bank buying and speculative inflows.
Market participants pointed to three immediate triggers:
- A stronger US dollar, buoyed by the nomination of Kevin Warsh as the next US Federal Reserve Chair, which reduced the appeal of dollar‑denominated commodities
- Easing geopolitical tensions, following reports of upcoming US-Iran talks, which lowered safe‑haven demand
- Heavy profit booking by traders and ETF investors after record highs
ETF data showed sharp outflows from silver‑backed funds, amplifying the downside move and increasing short‑term volatility. Axis Silver ETF, for instance, fell from ₹275 to ₹216.86 — a 21% decline in a single session.
In response to the sharp swings, MCX imposed additional margins of 4.5% on silver futures and 1% on gold futures, effective February 5, to curb excessive speculation and stabilise trading behaviour. The margin hike also triggered forced liquidations, accelerating the sell-off.
Impact on Indian investors and official cues
Market experts cautioned that the recent rally in precious metals was driven more by speculative momentum than underlying demand fundamentals.
Veteran investor Vijay Kedia said, “These are not investors driving the market, but speculators… Metals are meant to melt when there is too much heat.” He warned that such sharp rallies often reverse quickly and advised retail investors to rebalance portfolios if exposure to precious metals has become disproportionately high.
Analysts also highlighted that global policy signals, including interest‑rate expectations in the US and changing demand patterns from institutional investors, are reshaping price behaviour in gold and silver.
What investors should do now
Experts recommend caution in the near term as volatility remains elevated. Fresh long positions at current levels carry higher risk, especially if the dollar continues to strengthen or ETF outflows persist.
Long‑term investors are advised to focus on disciplined allocation strategies rather than short‑term price movements, while traders should closely track global macro cues and currency trends.
FAQs
Gold and silver prices corrected due to a stronger US dollar, easing geopolitical tensions and heavy profit booking, which reduced safe‑haven demand and triggered ETF outflows.
Gold and silver remain long‑term portfolio hedges, but experts advise caution in the short term due to high volatility and speculative price movements.
Experts recommend avoiding fresh long positions until prices stabilise and global cues become clearer, especially for short‑term investments.
Large inflows or outflows from ETFs can significantly impact prices by amplifying buying or selling pressure in global commodity markets.
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Disclaimer: This article is for informational purposes only and does not constitute investment advice. Readers should consult a certified financial advisor before making investment decisions.
